Analysts at Cordros Capital have predicted that medium-term yield in the bond market will be modestly higher thanks to domestic monetary policy direction, political uncertainty and government borrowing as the market closes on a bearish note.
“We expect yields to take a cue from primary auction stop rates in the coming week. However, we reiterate our expectation for modestly higher yields in the medium term, anchored on domestic monetary policy direction, capital flight amid higher yields in safe-haven assets, political uncertainty stemming from the upcoming general elections, and government borrowing to fund the 2018 budget”, the currency analyst from Cordros Capital stated
Trading in the bond market last week, closed bearish, as sustained selloffs from foreign investors, on the back of continued turmoil in emerging markets assets and slightly higher stop rate of the long-tenured bill at the OMO auction weighed heavily on investor sentiments.
As a result, average yield rose by 27 basis points week on week to 15.07 percent.
Yields expanded across the short (+49 bps), mid (+12 bps), and long (+21 bps) ends of the curve following selloffs of the JUL-2021 (+109 bps), FEB-2028 (+20 bps), and MAR-2036 (+26 bps) bonds, respectively.